January 27, 2009 / 8:09 PM / 10 years ago

Laid off workers ask Nortel to resume severance pay

(In U.S. dollars unless noted)

By Wojtek Dabrowski

TORONTO, Jan 27 (Reuters) - A group of workers laid off by ailing telecom equipment maker Nortel Networks Corp NT.TO NT.N has asked the company to restore the severance payouts it has suspended as it restructures under court protection.

“For anybody that’s let go, it’s extremely stressful and it’s a really abrupt end to your wages,” said Paula Klein, a former Nortel employee who was laid off less than two weeks before Christmas. “Severances are put in place to help people transition gracefully to new employment.”

Klein, who worked in research and development operations at the Toronto-based company, has been unable to find work thus far and is part of a group representing about 160 recently laid off Nortel employees in Canada who want their severance money.

In a memo to Nortel Chief Executive Mike Zafirovski and the board of directors, Klein’s group asked Nortel to overturn its decision to suspend promised severance “and, in so doing, uphold your stated commitment to the highest standards of business conduct and integrity, as well as provide emotional and financial relief to ourselves and our families in this difficult time.”

Nortel — North America’s biggest maker of telephone equipment — filed for bankruptcy protection in Canada and the United States earlier this month, blaming the current economic crisis for derailing a turnaround effort that began in 2005.

It had about $2.4 billion in cash when it sought court shelter from its creditors and about $4.5 billion in long-term debt, according to court documents.

As part of its attempt at turning around its business after the tech bubble burst earlier this decade, the company has cut thousands of jobs around the globe. Its workforce stands at about 30,000 today, down from a peak of more than 90,000 in 2000.

Many analysts expect further job cuts as the company’s restructuring proceeds.

Spokesman Mohammed Nakhooda said Nortel realizes the extra problems that suspending severance payments will cause the former employees, but added the move is necessary if Nortel is to succeed in the long term.

“This is a business of people-driven innovation and know-how,” he said. “But it is also a business that requires significant change to regain its financial footing and emerge as a more competitive player. Tough decisions are being taken — with the future health of Nortel as the ultimate objective.”

Klein said her group has received e-mails from former Nortel employees who say they are now unable to make mortgage payments or meet medical costs for sick family members.

“There’s a lot of people who are in dire straits.”

Nortel shares were unchanged at 10 Canadian cents on the Toronto Stock Exchange on Tuesday. In mid-2000, at the zenith of the company’s success, the stock was worth more than C$1,100, adjusted for a share consolidation that took place in late 2006.

$1=$1.23 Canadian Reporting by Wojtek Dabrowski; editing by Rob Wilson

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